Arizona Becomes the Latest State to Oppose Prediction Markets

The Arizona Department of Gaming (ADG) has ordered three major prediction markets to cease and desist. This is the latest effort to stutter sports-event contract providers’ rapid and somewhat controversial growth.

Prediction Markets Face Pushback

The ADG’s latest regulatory action saw it send cease-and-desist letters to Crypto.com, Kalshi, and Robinhood, all of which have been offering sports-event contracts.

Prediction markets are a novel betting alternative that allows consumers to buy shares in the outcome of an event, potentially winning or losing money. In addition to sports, such operators have offered wagers on a variety of other events, including political and legal outcomes.

Due to their specific format, however, prediction markets fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC). As a result, sports-event contract providers have argued that their products do not constitute wagering.

Sports betting regulators and industry stakeholders, however, have firmly opposed the growth of such products, arguing that since the CFTC license allows them to operate in all states, they have an unfair advantage over traditional operators.

As a result, several states, including Illinois, Maryland, Montana, Nevada, New Jersey and Ohio have pushed back against the offering of such products. Arizona has now joined their ranks slamming prediction markets for their alleged efforts to circumvent the law.

ADG Slammed Kalshi’s Efforts to Legitimize Its Conduct

In its letter to Kalshi, the ADG implied that there is “no meaningful difference” between buying a sports contract and placing a bet with a traditional sports betting platform, despite Kalshi’s efforts to “legitimize its conduct by labeling it as an ‘innovation.’”

The ADG further stated that Kalshi’s platform committed other offenses, including the offering of wagers to people under 21 and a broader lack of safer gaming tools.

The ADG said that Kalshi’s failure to comply with the cease-and-desist order would be further evidence of its “ongoing knowing and willful violation of the law.” Among other things, Kalshi could risk potential restitution and forfeiture of the proceeds it has acquired.

Kalshi Is Ready to Strike Back

In the meantime, Kalshi continues to fight for its place under the sun, firmly rejecting similar cease-and-desist orders in other states. The platform has remained adamant that it responds to the CFTC and not other regulators and would cease its activities only if the CFTC orders it to.

As a result, the platform has launched lawsuits against state regulators who have opposed its business model.